Hard budget cuts to deliver surplus

Prime Minister
Julia Gillard
has flagged cuts to government spending to deliver a surplus next financial year, warning of “hard choices" before the budget in May.

After meeting Reserve Bank of Australia governor
Glenn Stevens
and the chairman and chief executive of the Australian Securities Exchange,
David Gonski
and
Elmer Funke Kupper
, in Sydney yesterday, Ms Gillard said the local economy was a pillar of strength in the world but challenges lay ahead.

“We are experiencing growth,’’ Ms Gillard said.

“We have got low unemployment. Our economy is in a very different position from the economies of the United States and from the nations in Europe."

The government was “very determined" to return the budget to surplus in 2012-13, she said.

The Prime Minister will outline her plan to build a new economy which is “even stronger, one which is full of opportunity" in a speech in Melbourne today.

“As Australians see the problems of Europe, we see the importance of fiscal discipline," she will say.

In November, Treasurer
Wayne Swan
forecast a $37.1 billion deficit for the year ending June 30 and a $1.5 billion surplus the year after.

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The debt crisis in Europe and a slowing US economy have cut $140 billion from government revenue, including $20 billion in the six months since the 2011-12 budget was delivered.

The government has rejected calls from industry groups including the Business Council of Australia and the Labor Party’s Left faction to reconsider the surplus target in the light of global economic challenges.

“In our growing economy it’s the right thing to have fiscal discipline and to bring the budget to surplus, which is why we are determined to do it," Ms Gillard said yesterday.

“Budgets are about choices, and in order to deliver a surplus. We do need to make room for new spending by making cutbacks. Sometimes that means that there are very hard choices but we will keep taking that approach because it’s not in Australia’s interest to end up, for example, in the position that the opposition is now where they need to make $70 billion of cutbacks before they even get to the starting line."

The Prime Minister said Australia enjoyed higher jobs growth, lower taxes and lower interest rates under Labor than it had under the Howard government.

As part of the growing Asia-Pacific region, the country was poised to take advantage of economic opportunities but the high Australian dollar – driven by the resources boom – meant that other sections of the economy were under pressure.

Today Ms Gillard will promise to foster “an economy with the technical and scientific capabilities required to make cars – which sustains those capabilities through the economic cycle – and that’s why this government is working with the Australian car industry to lift its capacity for innovation and design".

Citing the Button car plan of the 1980s, she will say: “There is no case . . . for a half billion dollar cut to automotive industry assistance in the current economic environment".